Financial Release

STAMFORD, Conn.--(BUSINESS WIRE)--Nov. 14, 2017--
Growth in marketing budgets has stalled after continued increases over
recent years, according to a survey by Gartner, Inc. The survey found
that marketing budgets hit a plateau in 2017 after three years of
growth, with budgets falling from 12.1 percent of company revenue in
2016 to 11.3 percent in 2017, representing a return to 2015 levels.

Chief marketing officers (CMOs) have modest expectations in 2018. Only
15 percent say they expect a significant increase in budget; 52 percent
expect a slight increase. One-third expect their budgets will be cut or
frozen.

Gartner's2017-2018
CMO Spend Survey was conducted from June through August 2017 among
353 marketing executives in North America and the U.K. at companies with
more than $250 million in annual revenue.

"While the descent is not yet steep, it still poses difficult questions
for chief marketing officers," said Ewan
McIntyre, research director at Gartner. "Previous budget increases
have come with weighty expectations, some of which have yet to be met.
The time has come for marketing to show its financial management
credentials, proving it can deal with financial constraints, assume
accountability for business performance, build budgets based on future
returns rather than past assumptions, and grow the business while making
hard choices."

2017 has been a year of significant macroenvironmental upheaval, in
terms of both global politics and natural disasters — North Korea,
Brexit and hurricanes Harvey, Irma and Maria, for example. Marketing is
not immune to the business impact that stems from such incidents. There
is also evidence that CMOs may have become distracted — either by a
heavy focus on operational and tactical measures of performance, or by
large, cross-functional initiatives such as customer
experience (CX) programs that have yet to provide hard economic
benefits.

"The risk is that CMOs are either being too nearsighted to be strategic
or too visionary to deliver against marketing's objectives," said Mr.
McIntyre. "The result is a lack of focus on the metrics that matter to
CMOs and the business — how marketing activities deliver return
on investment and profitability to the organization."

Not all organizations have felt the impact to the same extent.
Extra-large businesses have been shielded from cuts thus far, and cuts
have varied across industries, with retail and manufacturing hit
hardest. While Gartner predicted these cuts, they will come as a
surprise to many CMOs. Only 14 percent of respondents surveyed in last
year's CMO Spend Survey anticipated cuts in 2017, meaning many CMOs will
be ill-prepared for change. CMOs need to think and act fast, ensuring
they continue to meet the growing business expectations or further cuts
will be ahead.

Expect Increased Investment in Digital Advertising

The survey found that two-thirds (67 percent) of CMOs plan to increase
investment in digital
advertising, while traditional media faces budget losses. More than
half of CMOs expect their investments in event marketing and
partner/channel marketing to fall or flatline, with 63 percent of
marketers stating they expect flat growth or cuts in offline advertising
investment. At the same time, investments are growing across a range of
digital channels, including websites (61 percent of CMOs expect to
increase investment) and mobile (59 percent expect to increase
spending). CMOs also show a strong and continued commitment to social
marketing, with 64 percent planning to boost budgets.

"The shift to digital away from traditional media reflects changing
media consumption habits of target audiences," said Mr. McIntyre.
"However, without capabilities like marketing
mix modeling (MMM), CMOs risk cutting away at channels based on gut
feel, irrespective of the journeys their customers and prospects
actually take to buy, own and advocate their product and brand. These
journeys likely include a range of digital and traditional touchpoints,
which interplay and integrate with each other."

Measurability is a contributing factor to digital media budget growth.
CMOs' focus on analytics reflects the need to demonstrate marketing and
advertising performance and effectiveness to the business. The
multichannel journey demands that marketing leaders go further than
channel performance metrics and challenges them to employ advanced
analytics to answer the elusive total marketing ROI question.

CMOs Are Focusing Budgets on Existing Customers

Marketing logic dictates that it requires more resources to acquire a
new customer than to retain or grow an existing one. Consequently CMOs'
budgets have become heavily skewed toward retention, with budgets
dwarfing acquisition budgets by a ratio of two-to-one. However, this
ratio can only be justified if it reflects the profitability existing
customers bring to the business. Valuable marketing budget may be
diverted to nurturing the wrong customers — those that are a long-term
drag on profitability because they buy low-margin products, buy only
during promotions or have high servicing costs. Furthermore, discarding
the value of acquisition may harm the long-term financial health of the
business.

Martech Spending Feels the Squeeze

Marketing technology (martech) spending has fallen by 15 percent in
2017, as CMOs pull back on previous high spending commitments amid
concerns over marketing's capability to acquire and manage technology
effectively. Martech continues to account for a significant proportion
of CMOs' spending power, with 22 percent of the total marketing expense
budget allocated to technology. However, this is a significant drop year
over year, as last year's survey reported that 27 percent of marketing
budget was allocated to martech.

Gartner, Inc. (NYSE: IT) is the world's leading research and advisory
company. The company helps business leaders across all major functions
in every industry and enterprise size with the objective insights they
need to make the right decisions. Gartner's comprehensive suite of
services delivers strategic advice and proven best practices to help
clients succeed in their mission-critical priorities. Gartner is
headquartered in Stamford, Connecticut, U.S.A., and has more than 13,000
associates serving clients in 11,000 enterprises in 100 countries. For
more information, visit gartner.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Gartner's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.